Portfolio Construction

Ascertaining an individual’s financial situation and investment goals are the first tasks in constructing a portfolio. Important items to consider are age, how much time you have to grow your investments, as well as amount of capital to invest and future capital needs. A second factor to take into account is the individual’s risk tolerance. Are you the kind of person who is willing to risk some money for the possibility of greater returns? Taking these factors into account we believe asset allocation and diversification are key to the construction of a client’s portfolio.

Asset Allocation

Asset allocation is an investment portfolio technique that aims to balance risk and create diversification by investing among major asset classes such as cash, bonds, equities, property and absolute returns. Each asset class has different levels of return and risk, so each will behave differently over time. For instance, while one asset class increases in value, another may decrease or not increase as much. The consensus among financial advisors is that asset allocation is one of the most important decisions that investors make.

Diversification

An individual’s asset allocation may represent a diversified portfolio or a concentrated portfolio. If a portfolio only holds a couple of specific asset classes, then it would be considered to be a concentrated portfolio. At DLS Capital Management, we use diversified portfolios as we believe having a diversified asset allocation has the potential to improve your returns while reducing your investment risk. While diversification between assets is important, we also ensure our portfolios are diversified within each asset class, e.g. by sector, industry and region.